Q+A with Mike Sand

President and CEO, Timberland Bank

In his 16 years as Timberland Bank’s president and CEO, Mike Sand has steered the institution through periods of economic crisis and tremendous growth. During that time, he has established himself as a measured and powerful leader — but when he arrived in Hoquiam as a freshly minted college graduate some 40 years ago, he didn’t exactly have his sights set on becoming CEO.

After his college sweetheart and soon-to-be wife Cindy was offered a teaching position in Hoquiam, Sand was unsure how he would put his economics degree to use in Grays Harbor County.

“My first thought was, ‘Would I be able to find something in terms of employment here?’” Sand remembered.

Employment first came as a part-time gig at a local cabinet-making shop. Then in fall 1977, Sand was offered a job as a loan officer at Timberland Bank. As he learned the ropes, Sand did a little bit of everything. “I worked part-time as a teller, I worked part-time putting loans on the books and issuing checks for loan closings. I learned how to be a loan officer, among other responsibilities,” Sand recalled.

Promoted to branch manager in 1979, Sand steadily ascended the rungs while simultaneously earning an MBA from the University of Puget Sound. In January 2003, Sand became Timberland Bank’s president, adding the CEO title later that year.

Sand also has taken Timberland Bank — which was founded in 1915 to finance homes during Hoquiam’s logging boom — to new heights. Under his leadership, the bank’s assets cleared the billion-dollar mark in 2018. “Pretty significant difference from when I started, and the whole branch was $38 million,” Sand reflected. “We’re a different organization now.”

Most recently, in September, Sand was elected chairman of the board of the Community Bankers of Washington.

In his conversation with South Sound Business, Sand offered insights into his career at Hoquiam’s legacy bank, discussing the bank’s expansions, its enduring relationship with the community, and what it’s like to take the reins of a century-old financial institution.

Even though Timberland Bank has expanded significantly over the years, with 24 branches now in six counties, it remains headquartered in Hoquiam. How has the relationship with the community evolved as industry has changed and as the bank has expanded?

Our relationship with the Grays Harbor area is pretty much the same as it has been. We’re very supportive, this is where our roots are, and we try to do as much business in Grays Harbor as we can. Frankly, the fact that we’ve branched out into other counties and grown the bank significantly just allows us to have more resources in terms of people and the ability to donate more in all the communities, including Grays Harbor, than we could have if we had just been contained in this county alone. I think the expansions just made us relevant to more people and have given us more capacity to help people in Grays Harbor.

The South Sound is home to many legacy banks that have been around a century or more. How does a bank stand the test of time, especially when there’s so much competition?

I think the nice thing that community banks have going for them is they almost always understand their customers better than a larger institution, and they can spend the time to learn more about their customers … I think when people need some assistance or have a glitch in their business, it’s community banks that often step up and provide the needed support and forbearance, if necessary, to help businesses along.

As far as surviving, it’s difficult for a smaller bank to do everything. Sometimes it’s important for smaller banks to have a particular niche or specialty that other people aren’t that keen on. For example, Timberland has always been known as a construction lender, and we’ve been in the construction market in good times and bad times supporting that sector … We (also) do a lot of commercial real estate lending and, to a lesser extent, business lending.

Can you talk a little bit about the recent acquisition of South Sound Bank — how it came together and how the transition has been?

We signed an agreement to acquire the company and closed it Oct. 1, 2018. It’s been a good fit for us. We offered everybody there a job — we decided we wouldn’t lay anybody off. As is common in an acquisition, folks decided that they want to go do something else, so some people did that, but we certainly were able to retain the most important people to make that acquisition successful. We were really pleased and continue to be really pleased with that.

How do you know when it’s the right time to open a new location? What’s the tipping point?

It’s getting more challenging to decide how many branches you should have. But when it’s time for people to sit down and talk to somebody, they want to go into a branch. So I don’t think branches are going away, but I don’t think they’re as heavily used as they once were. We’re seeing branches that are smaller than they once were, and the big office buildings that existed for banks are a thing of the past. It is challenging to know how many branches you really need, but for us, having been in Grays Harbor, it was important to branch out into areas where there was additional business to allow (us) to grow more quickly than we would have been able to otherwise.

We’re at that point again now. We recently bought a building to move our IT center into, so that’s going to free up some office space down in this market. The South Sound (Bank) acquisition bought us some additional space in west Olympia and in Lacey. For us, office space and branching are due to a need for additional space to house people.

What have been the biggest challenges in your career?

My biggest challenges have been those that come from a poor economy. The biggest challenge was probably in the early ’80s, when interest rates were 21 percent … Although there have been a couple of downturns (since) then, 2009-10 was probably the second-worst for the banking industry. When economies head in downturn and people lose jobs and people can’t make their payments, it’s challenging for financial institutions. You try to support people to the full extent that you can, but it’s hard to overcome a tough economy.

How did Timberland Bank weather the storm?

A bank needs to have plenty of capital and pretty strong core earnings so they can withstand downturns in the economy. In that last recession, I think there were 18, maybe 19, banks that failed in the state of Washington. Not everybody made it through. Timberland had about 32 percent of its assets that were tied to the acquisition and development sector, which commonly is known as the construction sector. We were still able to manage through it and survive and only had a couple of years of losses. In 2009, we had about $240,000 of losses, which was nominal. In 2010, we lost about $2.3 million. We had net worth of probably $82 to $84 million. So it was no fun, but it never threatened our existence at all. Timberland has always been reasonably conservative and had good capital and good core earnings to help us get through tough times.

What is the biggest joy of leading a 100-year-old institution?

One of the biggest joys is when I drive around and look at the different businesses we’ve helped and different homes we’ve been able to finance for people … And with some of our lenders, who’ve been around for a long time, they started working with individuals who became parents, and then we found out we were funding projects for the kids, and ultimately, we were doing business with the grandkids. It’s just neat to see that type of longevity with customers and families, and how we’ve been able to support families through different generations.